A Brisbane-based property investment and development company is seeking to $3 million from small investors to fund a new housing estate on the promise of 12 per cent annual returns.

CFMG Capital, founded and led by lawyer Scott Watson, said the money raised as part of its Land & Opportunity Fund – an unlisted managed investment scheme – would be used to fund a portion of the development costs of Elevate, a 100-lot community on a 5.7 hectare site in Ormeau Hills on the Gold Coast Hinterland.

The 12 per cent per annum return is based on a two-year fixed-term investment with the minimum investment being $25,000. The fund has invested in seven housing projects with gross sales values of more than $200 million.

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"We don't speculate, we purchase land ready to develop now and actively manage the projects ourselves. This is why we have both fixed terms and fixed returns," he said.

Short time frame

He added that CFMG did not earn fees or profits until the fixed 12 per cent return is paid to investors, and that their projects were supported by major banks.

"The fund only accounts for about 20-25 per cent of the debt for a project," Mr Thomson said.

CFMG settled on the Ormeau property in June and said stage one subdivision works would commence in October with stage one settlements expected in 2019. It currently has approval for 96 lots which CFMG will seek to increase to 100.

Asked how CFMG could generate a 12 per cent annual return in a relatively short time frame given land developments can take a while to generate cash flow from settlements, a spokesman for CFMG management explained:

"If a project has a three-year term, the payment structure would be 4 per cent at year 1, 4 per cent at year 2 and 28 per cent at the end of the three year term – a total of 36 per cent.

"The reason we pay the interim returns is to assist clients/investors with any tax obligations they may have."